Why No Frills is going after the ‘frugal-chic’ consumer

How do you advertise a brand called No Frills, when advertising itself could be seen as a frill?

In part, that tension is what has kept the discount grocery chain owned by Loblaw Cos. Ltd. to a marketing minimum for years now. While the retailer relies heavily on smaller vehicles such as flyer promotions, it has been nearly seven years since the chain did a countrywide advertising campaign.

"It is absolutely a tricky balance to strike. It's something that we've wrestled with quite a bit," said Uwe Stueckmann, Loblaw's senior vice-president of marketing. "We're never going to be lavish spenders."

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But on Monday, the chain is launching a campaign to try to "re-energize" the No Frills brand. According to Mr. Stueckmann, it's a response to the "renaissance" of discount retailers in Canada, and the rise of a "frugal-chic consumer" who sees discount shopping not as a compromise, but as a savvy choice. This has been fuelling a global growth in discount retail – even as household incomes have risen, according to a recent report from Boston Consulting Group.

Just 10 years ago, discounters typically held a 10-per-cent-to-20-per-cent share of the overall grocery market; the BCG report estimates that could soon grow to as much as half the market in some countries.

"The growth is being driven by increased pressure on consumer spending after the last financial crisis, coupled with a consumer preference for a simpler, more convenient shopping experience," said Cliff Grevler, managing partner at BCG Canada.

Canada is a "nascent" market for discount with plenty of room to grow: while the report pegs Canadian discounters at less than a 5-per-cent market share, Mr. Grevler notes this is determined by the European discount standard – set by such retailers as German giants Aldi and Lidl – which is far more scaled-down and offers about one-third of the products that a typical Canadian store would. Taking into account what Canadian consumers would see as discount, including Costco Wholesale Corp., Wal-Mart Canada Corp., No Frills, Sobeys Inc.-owned FreshCo and Metro Inc.-owned Food Basics, the lower-priced grocers hold about 30 per cent of the market here.

No Frills, which has been around since 1978, has roughly 250 stores across Canada. Over the years, it has gone from a bare-bones approach to offering an expanded selection of products.

The European discounters have also been expanding their store offerings – and have been looking to new markets for further growth. By the end of next year, Lidl plans to have 100 stores in the United States and Aldi will have established more than 2,000. Neither retailer have announced plans to expand to Canada. But with European players encroaching on North American turf, could No Frills be preparing for the potential of heightened competition in Canada?

"Those German discount chains aren't here today. We're doing this right now really because we think there's an opportunity to re-energize our No Frills network," Mr. Stueckmann said.

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It's also inspired by a successful effort in Quebec last year, where Loblaw's No Frills equivalent, Maxi, released its first large-scale advertising campaign in a decade starring comedian Martin Matte. It was designed to communicate to consumers that the discounter offered the same level of quality as other grocers – the only difference was the presentation.

While Loblaw does not break out results for its various store brands, Mr. Stueckmann said that campaign has had "really solid business results," and made the case for doing something similar with No Frills.

The new TV ad, which begins airing Monday, has a similar message: when a woman in a fancy grocery store wonders why her apple is so expensive, a jazz singer hired to entertain shoppers croons to her about all the cosmetic features of the store that jack up prices.

The campaign will also include radio, in-store ads and social-media elements. The messages, in the brand's familiar black-and-yellow lettering, attempt to mimic the conversational tone of other social-media posts, such as, "I want to pay more. Said no one ever." The company is revamping No Frills' social-media voice to take part in more conversations online.

"Our general strategy is that we seed an idea in mass media, but then build on that in social. Social media is really where our campaigns live, and spread," Mr. Stueckmann said.

The tension in a campaign such as this is that Loblaw operates a portfolio of stores, some of them – particularly in urban markets – sporting some of the more upscale presentation (if not the jazz trio) that the new ad mocks.

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"We have different stores for different consumer segments, and No Frills has a very clearly defined value proposition," Mr. Stueckmann said. "We have to communicate that as strongly as we can."

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